Abstract

This study is to investigate the wrong impact of fiscal imbalance on economic growth of country through contiguous monetary policy made by central bank of Pakistan. The purpose of the empirical study is to determine the solution of monetary policy which emulated fiscal deficit that cause to imbalance in money supply and diverges interest rate on bank borrowings. To keeping view of literatures, reveals the monetary policy and fiscal imbalance relationship which creates the view of fiscal challenges in economy. Data has been collected from prior research studies and literatures. In this study correlation and regression analysis are being used to measure the relationship between monetary and fiscal variables. For this analysis, these statistical measurements evaluated the fiscal imbalance and monetary policy. Besides, the ANOVA and Multicollinearity also were used. The research study is limited to economic statistics from 1980 to 2013 that possibly collected from Pakistan bureau of statistics. The conclusive point of this study that fiscal imbalance could be improvised by adopting monetary policy appropriately implemented in economy that could make sustainable growth in country. By this change, inflation indicates integral part of fiscal deficit and monetary stances. For this study, Correlation and regression analysis showed that predictive approaches of fiscal imbalance with inflation and monetary policy which is not adequately adjusted with economic growth.

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